Will Request GST Council For Reconsideration Of New Gaming Tax: Rajeev Chandrasekhar

Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology, responding to criticism regarding the 28 per cent goods and services (GST) tax on online gaming, conveyed that he will "go back to the GST council and may request it for consideration on the new regulatory framework".

The GST Council is not the Indian government. All state governments are represented on the council, making it a federal organisation, he added.

"A GST framework has been developed by state governments and finance ministries. While we may disagree with the findings, we have to recognise that the process of developing a framework has already begun as of January 2023," he remarked at a forum on CNN-News18.

Underlining the sustainable evolution of frameworks in the digital space, the MoS commented, "I believe it is better to slowly progress and evolve sustainable frameworks rather than rushing to react to industry or startup anger, which can lead to downstream mistakes. Our Prime Minister's vision for the digital space is clear: to ensure that everything we do aligns with the perspective of a future India. The laws and rules undergo a detailed process, and only after thorough consultation do we onboard people into online gaming. It is important to prioritise doing it right rather than doing it fast.

The industry leaders have expressed their discontent with this decision. Former BhartPe founder Ashneer Grover also slammed the Central government on Tuesday for imposing a 28 per cent Goods and Services Tax (GST) on online gaming. "The Centre's decision will simply "murder" the $10 billion online gaming industry, and it is now time for startup founders to enter politics," Grover added.

The BharatPe co-founder tweeted on this matter, "RIP real money gaming industry in India. If the government is thinking people will put in Rs 100 to play on Rs 72 pot entry (28 per cent Gross GST); and if they win Rs 54 (after platform fees)- they will pay 30 per cent TDS on that - for which they will get a free swimming pool in their living room come the first monsoon - not happening!".

According to a Deloitte assessment, the sector anticipates a considerable drop in tax income during the anticipated first five years if the tax obligation is raised from 18 per cent on GGR to 28 per cent on CEA (the contest entry amount).

The report also suggests applying 28 per cent GST on CEA may result in a reduction of industry revenue by about 43 times in year five when the incidence of increased costs on account of increased tax is completely passed on to customers.

India's gaming revenue expanded from USD 2 billion in FY21 to USD 2.6 billion in FY22 and is expected to increase at a CAGR of 27 per cent to USD 8.6 billion in FY27, according to Lumikai, a gaming and interactive media venture fund. Out of USD 2.6 billion, approximately USD 1.5 billion came from pay-to-play gaming, which represents almost 58 per cent of the industry's revenue. There are 430-460 million gamers in India, and this number is expected to reach 600-650 million by FY25.

Sanjay Malhotra, the Revenue Secretary, previously responding on this matter, has stated that the online gaming industry "collects very little tax" and that the effect of the uniform 28% Goods and Services Tax (GST) rate on the same "needs to be seen" because it will depend on the price elasticity of demand of the industry. 

He continued by saying that it would be premature to speculate about whether the industry would be destroyed, whether there would be an impact, or what kind of influence it would have. 

The [GST] Council, however, was unanimous. Every state, without exception, was in agreement when it came to internet gambling in particular, the revenue secretary conveyed.

Mitesh Gangar, Co-Founder & Director, PlayerzPot, underlining the impact of the 28 per cent tax, stated, "The GST council's decision to levy 28 per cent GST on total face value on online gaming will corner the gaming industry in a big way. The overall operations will not be feasible. The high tax burden will completely restrict the cash flow, limiting a company’s ability to invest in research, innovation, expansion or survival. The higher burden will also put a blocker on India’s massive gaming industry and deter the new player from entering the industry. The rising gaming economy will take a big hit and trigger economic stress, restrict job creation and curtail economic growth within the sector."